Gryphon Digital Mining(GRYP) - 2025 Q2 - Quarterly Report

Cautionary Note Regarding Forward-Looking Statements This section provides a disclaimer about forward-looking statements, highlighting inherent risks and uncertainties that may cause actual results to differ Forward-Looking Statements Disclaimer This section highlights that the 10-Q report contains forward-looking statements subject to various risks and uncertainties, which could cause actual results to differ materially from expectations. The company does not guarantee future results and undertakes no obligation to update these statements, except as required by law - The report contains forward-looking statements that involve numerous risks and uncertainties, which could cause actual results to differ materially from expectations[11] - Key risks include difficulty in raising additional capital, failure to close mergers, integration challenges, downturns in the cryptocurrency industry, inflation, increased interest rates, hardware procurement issues, and regulatory changes[12][15] - The company does not guarantee future results, levels of activity, performance, or achievements and undertakes no obligation to update or revise forward-looking statements, except as required by law[13] PART I FINANCIAL INFORMATION This part presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements, including the Balance Sheets, Statements of Operations, Statements of Changes in Stockholders' Deficit, and Statements of Cash Flows for Gryphon Digital Mining, Inc. and its subsidiaries Condensed Consolidated Balance Sheets This section presents the company's unaudited condensed consolidated balance sheets, detailing assets, liabilities, and stockholders' deficit Condensed Consolidated Balance Sheets | Assets/Liabilities | June 30, 2025 (Unaudited) | December 31, 2024 | | :------------------------- | :-------------------------- | :------------------ | | Assets | | | | Cash and cash equivalents | $678,000 | $735,000 | | Prepaid expenses | $1,288,000 | $409,000 | | Marketable securities | $72,000 | $115,000 | | Digital assets | $917,000 | $1,016,000 | | Total current assets | $2,955,000 | $2,275,000 | | Mining equipment, net | $2,011,000 | $2,994,000 | | Intangible asset | $100,000 | $100,000 | | Deposits | $1,131,000 | $2,263,000 | | Total assets | $6,197,000 | $7,632,000 | | Liabilities | | | | Accounts payable and accrued liabilities | $11,697,000 | $9,045,000 | | Note payable - current portion | $213,000 | $213,000 | | Current liabilities | $11,910,000 | $9,258,000 | | Note payable less current portion | $5,278,000 | $5,384,000 | | Total liabilities | $17,188,000 | $14,642,000 | | Stockholders' deficit | $(10,991,000) | $(7,010,000) | | Total liabilities and stockholders' deficit | $6,197,000 | $7,632,000 | - Total assets decreased by $1,435,000 (18.8%) from $7,632,000 at December 31, 2024, to $6,197,000 at June 30, 2025[17] - Total liabilities increased by $2,546,000 (17.4%) from $14,642,000 at December 31, 2024, to $17,188,000 at June 30, 2025[17] - Stockholders' deficit worsened by $3,981,000 (56.8%) from $(7,010,000) at December 31, 2024, to $(10,991,000) at June 30, 2025[17] Unaudited Condensed Consolidated Statements of Operations This section presents the company's unaudited condensed consolidated statements of operations, outlining revenues, expenses, and net loss Unaudited Condensed Consolidated Statements of Operations | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Mining revenue | $1,377,000 | $5,515,000 | $2,935,000 | $13,005,000 | | Cost of revenues | $1,608,000 | $3,803,000 | $3,662,000 | $8,640,000 | | General and administrative expenses | $1,647,000 | $3,828,000 | $4,647,000 | $6,289,000 | | Stock based compensation expense | $39,000 | $140,000 | $811,000 | $348,000 | | Depreciation | $515,000 | $3,292,000 | $1,586,000 | $6,539,000 | | Unrealized (gain) loss on digital assets | $(200,000) | $318,000 | $(73,000) | $(1,385,000) | | Total operating expenses | $3,609,000 | $11,381,000 | $10,633,000 | $20,431,000 | | Loss from operations | $(2,232,000) | $(5,866,000) | $(7,698,000) | $(7,426,000) | | Total other income (expense) | $(3,025,000) | $1,857,000 | $(3,839,000) | $(8,327,000) | | Net loss | $(5,257,000) | $(4,009,000) | $(11,537,000) | $(15,753,000) | | Net loss per share, basic and diluted | $(0.07) | $(0.10) | $(0.16) | $(0.44) | - Net loss for the three months ended June 30, 2025, increased to $(5,257,000) from $(4,009,000) in the prior year, a 31.1% increase[19] - Net loss for the six months ended June 30, 2025, decreased to $(11,537,000) from $(15,753,000) in the prior year, a 26.8% decrease[19] - Mining revenue for the six months ended June 30, 2025, decreased by $10,070,000 (77.4%) compared to the same period in 2024, primarily due to increased global hashrate and the Bitcoin halving event, despite a higher average Bitcoin value[19][190] Unaudited Condensed Consolidated Statement of Changes in Stockholders' Deficit This section details changes in stockholders' deficit, including net loss, stock issuance, and other equity adjustments - The total stockholders' deficit increased from $(7,010,000) at December 31, 2024, to $(10,991,000) at June 30, 2025, primarily due to a net loss of $(6,280,000) for the first three months of 2025 and $(5,257,000) for the second three months of 2025, partially offset by proceeds from stock issuance[21] - Additional paid-in capital increased from $60,050,000 to $68,309,000, driven by proceeds from stock issuance (ATM), warrants issued, and common stock issued for services and RSU vesting[21] - Common stock shares outstanding increased from 52,991,590 at December 31, 2024, to 74,101,315 at June 30, 2025[17][21] Unaudited Condensed Consolidated Statements of Cash Flows This section presents the company's unaudited condensed consolidated statements of cash flows, categorizing activities into operating, investing, and financing Unaudited Condensed Consolidated Statements of Cash Flows | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(4,098,000) | $(782,000) | | Net cash used in investing activities | $(1,815,000) | $(954,000) | | Net cash provided by financing activities | $5,856,000 | $2,040,000 | | Net change in cash | $(57,000) | $304,000 | | Cash-end of period | $678,000 | $1,219,000 | - Net cash used in operating activities significantly increased to $(4,098,000) for the six months ended June 30, 2025, from $(782,000) in the prior year, primarily due to higher cash expenditures for operations[24][231][232] - Net cash provided by financing activities increased to $5,856,000 for the six months ended June 30, 2025, from $2,040,000 in the prior year, driven by proceeds from registered direct offerings and ATM stock sales[24][235][236] Notes to Unaudited Condensed Consolidated Financial Statements This section provides detailed notes explaining the significant accounting policies and specific financial statement line items NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This note details the company's organization, including its reverse merger with Akerna Corp. in February 2024, which transitioned it into a publicly traded Bitcoin mining company. It also outlines the proposed ABTC Merger Agreement, which would result in ABTC stockholders owning approximately 98.0% of the Combined Company. Key accounting policies such as basis of presentation, going concern, revenue recognition for cryptocurrency mining, and recent accounting pronouncements are also discussed - Gryphon became a publicly held entity in February 2024 through a reverse merger with Akerna Corp., with Ivy Crypto, Inc. (now Gryphon) treated as the accounting acquirer[27][30][33] - The company entered into an ABTC Merger Agreement on May 9, 2025, where ABTC stockholders are expected to own approximately 98.0% of the Combined Company's equity interests, and ABTC's business will become the Combined Company's primary business[36][40] - The financial statements are prepared on a going concern basis, but the company may incur additional losses and negative cash outflows, requiring future debt or equity financing[45][47] - Revenue from cryptocurrency mining is recognized when computing power is provided to mining pool operators, with non-cash Bitcoin consideration measured at fair value using the intraday average quoted price[74][77][80] - The company adopted ASU 2023-08 (Crypto Assets) on January 1, 2024, requiring crypto assets to be measured at fair value with changes recognized in net income[255] NOTE 2 - DIGITAL ASSETS This note provides a summary of the company's Bitcoin transactions and holdings, including revenue recognized from mined digital assets, sales, and fair value adjustments. It also details the number of Bitcoin held and their carrying and fair values Digital Assets Summary | Item | Six Months Ended June 30, 2025 | Year Ended December 31, 2024 | | :-------------------------------------- | :----------------------------- | :--------------------------- | | Digital assets beginning balance | $1,016,000 | $2,097,000 | | Revenue recognized from mined digital assets | $2,921,000 | $20,539,000 | | Cost of digital assets sold for cash | $(3,094,000) | $(20,260,000) | | Fair value gain on digital assets | $74,000 | $1,566,000 | | Digital assets ending balance | $917,000 | $1,016,000 | Bitcoin Holdings | Bitcoin Holdings | June 30, 2025 | December 31, 2024 | | :----------------------- | :------------ | :---------------- | | Number of Bitcoin held | 8.56 | 10.93 | | Carrying basis - per Bitcoin | $93,830 | $61,532 | | Fair value - per Bitcoin | $107,173 | $92,987 | | Carrying basis of Bitcoin | $802,969 | $672,259 | | Fair value of Bitcoin | $917,000 | $1,016,000 | - The number of Bitcoin held decreased from 10.93 at December 31, 2024, to 8.56 at June 30, 2025[105] - The fair value per Bitcoin increased from $92,987 at December 31, 2024, to $107,173 at June 30, 2025[105] NOTE 3 - MARKETABLE SECURITIES This note details the company's marketable securities, primarily consisting of Sphere 3D's restricted common stock received upon termination of a merger agreement. These securities are classified as available-for-sale and measured at fair value Marketable Securities Fair Value | Item | June 30, 2025 | December 31, 2024 | | :---------------------- | :------------ | :---------------- | | Fair value - beginning of period | $115,000 | $403,000 | | Change in fair value | $(43,000) | $(288,000) | | Balance - end of period | $72,000 | $115,000 | - The fair value of marketable securities decreased by $43,000 to $72,000 as of June 30, 2025, from $115,000 at the beginning of the period[109] NOTE 4 - DEPOSITS This note summarizes the company's deposits, primarily for co-location services and potential business acquisitions. It details the cancellation of several acquisition agreements (Giga Caddo, Captus Energy, RepairBit, Erikson National Energy) and the expensing of associated deposits and costs Deposits Summary | Item | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Balance - beginning of period | $2,263,000 | $420,000 | | Additions | $1,548,000 | $2,207,000 | | Merger and acquisition costs expensed | $(2,324,000) | - | | Amounts applied to accounts payable | $(356,000) | $(364,000) | | Balance - end of period | $1,131,000 | $2,263,000 | - Deposits decreased from $2,263,000 at December 31, 2024, to $1,131,000 at June 30, 2025, largely due to expensing of merger and acquisition costs[110] - The company canceled the Giga Purchase Agreement in March 2025, expensing approximately $350,000 in deposits[112] - The Captus Acquisition was assigned to a third party on May 29, 2025, resulting in a write-off of approximately $1,292,000 in acquisition costs and cancellation of related restricted stock awards[118] - The RepairBit Acquisition was canceled in June 2025, with $300,000 in refundable deposits used to pay for miner repair invoices[119] - The Erikson Purchase Agreement was canceled on February 14, 2025, leading to expensing approximately $608,000 of deposits as merger and acquisition expenses[122] NOTE 5 - MINING EQUIPMENT, NET This note details the company's mining equipment, including the number of units, additions, disposals, and accumulated depreciation. It also mentions a significant purchase of new mining machines Mining Equipment Summary | Item | June 30, 2025 | December 31, 2024 | | :---------------------- | :------------ | :---------------- | | Mining equipment (units) | 10,725 | 8,825 | | Mining equipment (cost) | $17,663,000 | $17,109,000 | | Accumulated depreciation | $15,652,000 | $14,115,000 | | Net carrying amount | $2,011,000 | $2,994,000 | - The number of bitcoin mining machines increased from 8,825 at December 31, 2024, to 10,725 at June 30, 2025[123] - Net carrying amount of mining equipment decreased by $983,000 (32.8%) from $2,994,000 at December 31, 2024, to $2,011,000 at June 30, 2025[123] - In March 2025, the company purchased 1,900 SI 9JPro series machines for approximately $608,000 cash and $100,000 in common stock[124] NOTE 6 - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES This note provides a summary of the company's accounts payable and accrued liabilities Accounts Payable and Accrued Liabilities | Item | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Accounts payable | $8,636,000 | $5,514,000 | | Accrued liabilities | $3,061,000 | $3,531,000 | | Total | $11,697,000 | $9,045,000 | - Total accounts payable and accrued liabilities increased by $2,652,000 (29.3%) from $9,045,000 at December 31, 2024, to $11,697,000 at June 30, 2025[125] NOTE 7 - NOTE PAYABLE This note details the company's note payable, which was restructured in October 2024. The restructuring converted a significant portion of the original Bitcoin-denominated note into common stock and warrants, with the remaining $5,000,000 converted into a new dollar-denominated note with a 4.25% annual interest rate Note Payable Summary | Item | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Principal - Note Payable | $5,000,000 | $5,000,000 | | Aggregate interest to be paid | $638,000 | $638,000 | | Interest payments made | $(147,000) | $(41,000) | | Notes Payable – long-term | $5,278,000 | $5,384,000 | - In October 2024, a $9,117,000 principal balance of the Amended BTC Note was converted into 8,287,984 shares of common stock and warrants to purchase 3,530,198 shares, and 2,000,000 shares at $1.50 per share[127] - A new $5,000,000 note payable was established, denominated in dollars, with a 4.25% annual interest rate payable monthly, and a one-time principal payment due October 25, 2027[127][133] - Subsequent to June 30, 2025, the company made principal payments of $2,000,000, reducing the outstanding balance[173] NOTE 8 - COMMITMENTS AND CONTINGENCIES This note outlines the company's various commitments and contingencies, including board member and CEO compensation, co-location agreements (Blockfusion, Mawson), and the settlement of the Sphere 3D litigation. It also addresses Nasdaq listing deficiencies and the company's legal proceedings Board Compensation Structure | Board Compensation Element | Amount | | :-------------------------------- | :----- | | Annual equity award | $160,000 | | Annual board cash retainer | $60,000 | | Annual Audit Committee Member Retainer | $10,000 | | Annual Compensation Committee Member retainer | $7,500 | | Annual Nominating/Governance Committee Member Retainer | $7,500 | | Annual Board Chair Additional retainer | $40,000 | | Annual Audit Chair Additional retainer | $20,000 | | Annual Compensation Chair Additional retainer | $15,000 | | Annual Nominating/Governance Chair Additional retainer | $15,000 | - The CEO Agreement includes time-based RSUs (fair value $735,000) and market-based RSUs (fair value $312,000) with vesting tied to stock exchange listing qualifications and market performance goals[132][134] - The company entered into a co-location agreement with Blockfusion USA, Inc. for 3,780 bitcoin miners, but operations were suspended on April 15, 2025, due to high industry hash rates and energy costs[140][141] - A Master Co-Location Agreement with Mawson Hosting LLC grants the right to host up to 5,880 miners with 20 MW of power[142] - The Sphere 3D litigation was settled on March 7, 2025, resulting in a $449,000 gain on settlement of accounts payable[148] - The company regained compliance with Nasdaq listing rules for minimum bid price and market value on June 6, 2025[150] NOTE 9 - STOCKHOLDERS' DEFICIT This note details changes in stockholders' deficit, including proceeds from a registered direct offering and an At The Market (ATM) offering, common stock issued for services, and stock-based compensation expenses related to restricted stock units and warrants - In January 2025, the company completed a registered direct offering, raising approximately $2,820,000 in gross proceeds by selling 6,866,856 shares and warrants[152] - Through its ATM program, the company raised net proceeds of approximately $3,758,000 for the issuance of 7,269,348 shares during the six months ended June 30, 2025[153] - Stock-based compensation expense increased to $811,000 for the six months ended June 30, 2025, from $348,000 in the prior year, due to new RSU grants to the CEO, VP of Energy, and Board members[157][197] Warrants Activity | Warrants Activity | Number of Shares | Weighted Average Strike Price/Share | | :------------------------ | :--------------- | :---------------------------------- | | Outstanding – December 31, 2024 | 5,530,198 | $0.55 | | Granted | 6,866,856 | $1.50 | | Exercised | (5,530,198) | $0.21 | | Outstanding – June 30, 2025 | 6,866,856 | $0.83 | - The Anchorage Warrant's strike price was lowered from $1.50 to $0.55, resulting in a $128,000 increase in fair value expensed as ABTC merger expense. Anchorage subsequently cashless exercised both Penny Warrants and Anchorage Warrants, resulting in 4,384,470 shares issued[167] NOTE 10 - FAIR VALUE OF FINANCIAL INSTRUMENTS This note provides information on the fair value measurements of the company's financial assets and liabilities, categorizing them into Level 1, Level 2, or Level 3 inputs based on observability Fair Value of Financial Instruments (Level 1) | Assets | June 30, 2025 (Level 1) | December 31, 2024 (Level 1) | | :------------------ | :---------------------- | :-------------------------- | | Marketable securities | $72,000 | $115,000 | | Digital assets | $917,000 | $1,016,000 | - All marketable securities and digital assets are measured at fair value using Level 1 inputs (quoted prices in active markets for identical assets)[169] NOTE 11 - SUBSEQUENT EVENTS This note discloses significant events that occurred after the balance sheet date of June 30, 2025, but before the financial statements were issued, including common stock issuances and principal payments on the note payable - Subsequent to June 30, 2025, the company issued 7,220,135 shares of common stock for net proceeds of approximately $8,505,000 through its ATM program[171] - On July 31, 2025, 557,228 shares of common stock were issued upon vesting of RSUs granted to the CEO, following the company regaining Nasdaq listing compliance[172] - Subsequent to June 30, 2025, the company made principal payments of $2,000,000 to reduce the outstanding balance of its Notes payable[173] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and results of operations, including an overview of its Bitcoin mining business, a breakeven analysis, recent developments, detailed analysis of operating results, liquidity, capital resources, and critical accounting policies Business Overview This section provides an overview of the company's Bitcoin mining operations, revenue model, and operational scale - Gryphon Digital Mining, Inc. is a Bitcoin mining company that launched operations in September 2021[176] - The company's revenue model involves mining and holding Bitcoin, selling only what is necessary for operating expenses and reinvestment[176] - Gryphon operates approximately 5,880 Bitcoin ASIC mining computers at a third-party hosted data center in Pennsylvania[177] - For the six months ended June 30, 2025 and 2024, Gryphon mined approximately 31 and 226 bitcoins, respectively[178] Breakeven Analysis This section analyzes the company's cost to mine Bitcoin, highlighting factors influencing profitability and operational efficiency Breakeven Analysis | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :----------------------------- | :----------------------------- | | Mining Revenues | $2,935,000 | $13,005,000 | | Bitcoin mined | 31.13 | 225.64 | | Value of one mined bitcoin | $94,282 | $57,637 | | Cost of Revenues (excluding depreciation) | $3,662,000 | $8,640,000 | | Cost to mine one bitcoin | $117,636 | $38,291 | - The cost to mine one Bitcoin increased significantly to $117,636 for the six months ended June 30, 2025, compared to $38,291 for the same period in 2024[179] - This increase in breakeven cost is primarily due to higher electricity costs (from $0.0736/kWh to $0.0926/kWh) and a consistent upward trend in the global Bitcoin network hashrate (45% increase YoY), leading to fewer bitcoins mined for the same energy consumption[182] Recent Developments This section outlines significant recent events, including merger agreements, operational suspensions, and acquisition updates - The company entered into an ABTC Merger Agreement on May 9, 2025, which is expected to result in ABTC stockholders owning approximately 98.0% of the Combined Company[183] - Mining operations under the Blockfusion Agreement were suspended on April 15, 2025, due to high industry hash rates and energy costs[185] - The Captus Energy acquisition agreement was assigned to a third party on May 29, 2025, leading to the write-off of acquisition costs and cancellation of related restricted stock awards[188] Results of Operations This section provides a detailed analysis of the company's financial performance, comparing results for the three and six months ended June 30, 2025, against the prior year Six months ended June 30, 2025 compared to the six months ended June 30, 2024 For the six months ended June 30, 2025, mining revenues significantly decreased by 77.4% due to increased global hashrate and the Bitcoin halving, despite a higher average Bitcoin value. Cost of revenues also decreased, but general and administrative expenses saw mixed changes, with a notable increase in salaries and wages and a decrease in investor relations expenses. Stock-based compensation increased, while depreciation and unrealized gains on digital assets decreased Six Months Ended June 30, 2025 vs 2024 | Item | 2025 | 2024 | Change (Dollar) | Change (Percentage) | | :---------------------------------- | :----------- | :----------- | :-------------- | :------------------ | | Mining revenues | $2,935,000 | $13,005,000 | $(10,070,000) | (77.4)% | | Cost of revenues (excluding depreciation) | $3,662,000 | $8,640,000 | $(4,978,000) | (57.6)% | | General and administrative expenses | $4,647,000 | $6,289,000 | $(1,641,000) | (26.1)% | | Stock-based compensation expense | $811,000 | $348,000 | $463,000 | 133.0% | | Depreciation expense | $1,586,000 | $6,539,000 | $(4,953,000) | (75.7)% | | Unrealized gain on digital assets | $(73,000) | $(1,385,000) | $1,311,000 | 94.7% | | Loss from operations | $(7,698,000) | $(7,426,000) | $272,000 | 3.7% | | Total other income (expense) | $(3,839,000) | $(8,327,000) | $(4,488,000) | (53.9)% | | Net loss | $(11,537,000)| $(15,753,000)| $(4,216,000) | (26.8)% | - Mining revenues decreased by $10,070,000 (77.4%) due to increased global hashrate (45% increase YoY) and the Bitcoin halving event, despite a 63.0% increase in the average value of Bitcoin mined[190][191] - Salaries and wages increased by $810,000 (178.4%) due to bonus accruals for executive officers and compensation for the CEO and VP of Energy hired in Q4 2024[195] - Merger and acquisition costs increased to $3,164,000 from $394,000, primarily due to the termination of the Giga Purchase Agreement, Erikson Purchase Agreement, and Captus Assignment Agreement[204][205] - ABTC merger costs of approximately $989,000 were incurred, including legal, accounting, fairness opinion fees, and warrant modification expenses[207] Three months ended June 30, 2025 compared to the three months ended June 30, 2024 For the three months ended June 30, 2025, mining revenues decreased by 75.0% compared to the prior year, driven by the Bitcoin halving and increased global hashrate. Operating expenses generally decreased, but net loss increased by 31.1%. Stock-based compensation decreased due to a reversal of Captus Energy restricted stock awards expense Three Months Ended June 30, 2025 vs 2024 | Item | 2025 | 2024 | Change (Dollar) | Change (Percentage) | | :---------------------------------- | :----------- | :----------- | :-------------- | :------------------ | | Mining revenues | $1,377,000 | $5,515,000 | $(4,138,000) | (75.0)% | | Cost of revenues (excluding depreciation) | $1,608,000 | $3,803,000 | $(2,195,000) | (57.7)% | | General and administrative expenses | $1,647,000 | $3,828,000 | $(2,181,000) | (57.0)% | | Stock-based compensation expense | $39,000 | $140,000 | $(101,000) | (72.1)% | | Depreciation expense | $515,000 | $3,292,000 | $(2,777,000) | (84.4)% | | Unrealized (gain) loss on digital assets | $(200,000) | $318,000 | $(518,000) | (162.9)% | | Loss from operations | $(2,232,000) | $(5,866,000) | $(3,634,000) | (62.0)% | | Total other (expenses) income | $(3,025,000) | $1,857,000 | $(4,882,000) | (262.9)% | | Net loss | $(5,257,000) | $(4,009,000) | $1,248,000 | 31.1% | - Mining revenues decreased by $4,138,000 (75.0%) due to the 50% reduction in block rewards from the April 2024 halving event and a 45% increase in average daily global hashrate, despite a 49.0% increase in the average value of Bitcoin mined[210][211] - Stock-based compensation expense decreased by $101,000 (72.1%) due to a $248,000 reversal of expense for Captus Energy restricted stock awards that were canceled[216] - Unrealized gain on digital assets was $200,000 for the three months ended June 30, 2025, compared to an unrealized loss of $318,000 in the prior year, driven by an increase in Bitcoin's fair market value[218] Liquidity and Capital Resources This section discusses the company's cash position, capital needs, and available financing options to support future operations - As of June 30, 2025, the company had cash and cash equivalents of $678,000 and an accumulated deficit of approximately $79,272,000[226] - Management believes current cash levels are insufficient for anticipated cash needs for the next 12 months, requiring additional capital through equity, debt, or credit facilities[227] - Approximately $62.036 million in capacity remains under the At The Market (ATM) offering program as of June 30, 2025[229] Summary of Cash Flow This section summarizes the company's cash flow activities, detailing cash used in operations, investing, and provided by financing Summary of Cash Flow | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(4,098,000) | $(782,000) | | Net cash used in investing activities | $(1,815,000) | $(954,000) | | Net cash provided by financing activities | $5,856,000 | $2,040,000 | - Net cash used in operating activities increased to $(4,098,000) in 2025 from $(782,000) in 2024, primarily due to higher cash expenditures[231][232] - Net cash provided by financing activities increased to $5,856,000 in 2025 from $2,040,000 in 2024, driven by proceeds from registered direct offerings and ATM stock sales[235][236] Capital Expenditures and Other Obligations This section details the company's capital spending, co-location agreements, and significant financial obligations - The Blockfusion Agreement for hosting services was suspended on April 15, 2025, due to high industry hash rates and energy costs[141][237] - The Mawson Agreement provides the right to host up to 5,880 miners with 20 MW of power[142][238] - The original Bitcoin-denominated note payable was restructured in October 2024 into common stock, warrants, and a new $5 million dollar-denominated note with a 4.25% interest rate[240][247] - The company has no off-balance sheet arrangements that have a material effect on its financial condition[246] Critical Accounting Estimates This section explains the critical accounting estimates and assumptions made in preparing the financial statements, which could impact reported amounts - The preparation of financial statements requires management to make estimates and assumptions that affect reported amounts, with actual results potentially differing materially[248] - Critical accounting estimates involve assumptions about highly uncertain matters, where changes could materially impact financial condition or results of operations[249] Recent Accounting Pronouncements This section reviews the impact and applicability of recently issued accounting standards updates on the company's financial statements - The company evaluates the applicability and impact of all Accounting Standards Updates (ASUs) on its financial statements[251] - As of the issuance of these financial statements, no ASUs were assessed and determined to be applicable to the company's financial position, results of operations, cash flows, or presentation[251] Non-GAAP Financial Measures This section presents non-GAAP financial measures, such as Adjusted EBITDA, to provide additional insights into business performance - The company provides Adjusted EBITDA as a non-GAAP financial measure to help understand, manage, and evaluate business performance[252][253] - Adjusted EBITDA is defined as GAAP net income (loss) plus adjustments for depreciation, interest expense, income tax expense, stock compensation, change in fair value of notes payable, gain on restructuring of bitcoin denominated note payable, and unrealized (gain) loss on marketable equity securities[252] Reconciliation to Adjusted EBITDA | Reconciliation to Adjusted EBITDA | 2025 | 2024 | | :-------------------------------- | :----------- | :----------- | | Net loss | $(11,537,000)| $(15,753,000)| | Exclude: Depreciation | $1,586,000 | $6,539,000 | | Exclude: Interest expense | $9,000 | $620,000 | | EBITDA | $(9,942,000) | $(8,594,000) | | Exclude: Stock-based compensation expense | $811,000 | $348,000 | | Exclude: Change in fair value of notes payable | - | $6,895,000 | | Exclude: Unrealized loss on marketable securities | $43,000 | $272,000 | | Adjusted EBITDA | $(9,088,000) | $(1,079,000) | - Adjusted EBITDA for the six months ended June 30, 2025, was $(9,088,000), a significant decrease from $(1,079,000) in the prior year[254] Recently Adopted Pronouncements This section details the accounting pronouncements recently adopted by the company and their impact on financial reporting - The company adopted ASU 2023-08, 'Intangibles - Goodwill and Other - Crypto Assets (Topic 350-60): Accounting for and Disclosure of Crypto Assets,' on January 1, 2024, resulting in a $740,000 increase in digital assets[255] - The company implemented ASU 2023-07, 'Segment Reporting (ASC Topic 280): Improvements to Reportable Segment Disclosures,' which requires disclosure of significant segment expenses and expanded interim disclosures[256] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section states that quantitative and qualitative disclosures about market risk are not applicable for smaller reporting companies - This section is not applicable for smaller reporting companies[257] Item 4. Controls and Procedures This section reports that the company's disclosure controls and procedures were not effective as of June 30, 2025, due to a material weakness related to insufficient personnel staffing in the accounting and financial reporting department. Remediation efforts are ongoing - As of June 30, 2025, the company's disclosure controls and procedures were not effective[259] - A material weakness was identified due to insufficient personnel staffing in the accounting and financial reporting department, leading to inadequate segregation of duties and review of financial statements[260] - Remediation efforts include adding internal resources for technical accounting, financial reporting, and internal controls, utilizing external firms, and evaluating/implementing new processes[262] - No changes in internal control over financial reporting materially affected or are reasonably likely to materially affect controls during the most recently completed fiscal quarter[264] PART II OTHER INFORMATION This part provides additional information including legal proceedings, risk factors, equity sales, and other disclosures Item 1. Legal Proceedings This section details ongoing legal proceedings, including an SBA review and DOJ inquiry regarding the forgiven PPP Loan, and a wrongful termination lawsuit filed by the former CEO - The SBA is reviewing the prior forgiveness of the $2.2 million PPP Loan for potential reversal, citing the company's purported ineligibility due to its cannabis industry software support at the time[267][268] - The company received a civil investigative demand from the DOJ seeking information about the PPP Loan and is cooperating with the inquiry[269] - A wrongful termination lawsuit was filed by the former CEO, Robby Chang, in the Ontario Superior Court of Justice in Canada, which remains unresolved after an unsuccessful mediation[271][272] Item 1A. Risk Factors This section updates the risk factors, primarily focusing on those related to the proposed ABTC Merger. Key risks include uncertainty of merger completion, potential for substantial disruptions, significant ownership and voting power dilution for current Gryphon stockholders, failure to realize anticipated benefits, termination fees, regulatory conditions, and conflicts of interest for officers and directors - The completion of the ABTC Mergers is uncertain and subject to various conditions, with a potential $5,000,000 termination fee payable by Gryphon if certain circumstances lead to termination[274][282] - Current Gryphon stockholders are expected to experience significant ownership and voting power dilution, owning only 2.0% of the Combined Company's equity interests and less than 0.01% of total voting power post-merger[278] - The intended benefits of the Mergers may not be realized, posing risks such as diversion of management attention, significant costs, and unforeseen integration difficulties[281][285] - Certain officers and directors of Gryphon have interests in the Mergers that differ from general stockholders, including severance payments and accelerated vesting of equity awards[287] - The ABTC Merger Agreement contains 'no-shop' and 'force the vote' provisions, which may discourage alternative takeover proposals[289] - Gryphon and ABTC expect to incur substantial expenses related to the Mergers, with Gryphon anticipating approximately $2.0 million in total fees and expenses[298][299] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section confirms that the company did not undertake any unregistered sales of equity securities or repurchase any common shares during the quarter ended June 30, 2025 - No unregistered sales of equity securities occurred during the quarter ended June 30, 2025[304] - The company did not repurchase any of its common shares during the quarter ended June 30, 2025[305] Item 3. Defaults Upon Senior Securities This section states that there were no defaults upon senior securities - There were no defaults upon senior securities[306] Item 4. Mine Safety Disclosures This section indicates that mine safety disclosures are not applicable - Mine safety disclosures are not applicable[307] Item 5. Other Information This section states that there is no other information to report - No other information is reported in this section[308] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including merger agreements, investor rights agreements, warrant amendments, assignment agreements, and certifications - Key exhibits include the Agreement and Plan of Merger with American Bitcoin Corp., Investors' Rights Agreement, Amendment to Warrant with Anchorage Lending CA, LLC, and Assignment and Amending Agreement with Captus Energy[311] - Certifications from the Chief Executive Officer and Chief Financial Officer pursuant to the Securities Exchange Act and Sarbanes-Oxley Act are also included[311] Signatures This section contains the official signatures certifying the accuracy and completeness of the financial report Report Signatures This section contains the signatures of the Chief Executive Officer and Chief Financial Officer, certifying the report on behalf of Gryphon Digital Mining, Inc - The report is signed by Steve Gutterman, Chief Executive Officer, and Simeon Salzman, Chief Financial Officer, on August 14, 2025[314]